Navigant Research Blog

EIA Foresees Fossil-Fueled Future for Transportation

Ryan Citron — December 20, 2013

The U.S. Energy Information Administration (EIA) released an early version of its Annual Energy Outlook (AEO) for 2014, depicting an energy future overwhelmingly shaped by the development of new oil and natural gas reserves.  Cumulative production of natural gas from 2012 to 2040 in the AEO2014 report is about 11% higher than in AEO2013, reflecting the continued growth in shale gas production from increased horizontal drilling and hydraulic fracturing.

Some of the highlights for transportation-specific forecasts from AEO2014 include:

  • Light-duty vehicle (LDV) energy consumption will decline sharply through 2040, due to slow growth in vehicle miles traveled (VMT) and accelerated improvement in fuel efficiency.
  • Energy consumption in the transportation sector overall will decline from 26.7 quadrillion Btu in 2012 to 25.5 quadrillion Btu in 2040.
  • Electric vehicles, including battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs), and hybrid electric vehicles (HEVs), will account for just 7% of total vehicle sales in 2040 (This sharply contrasts with Navigant Research’s report, Electric Vehicle Market Forecasts, which forecasts the same 7% penetration being reached by 2020).
  • LDVs powered by gasoline will remain the dominant vehicle type, retaining a 78% share of new LDV sales in 2040, down just 4% from an 82% share in 2012.

It is important to note that this reference case scenario released by the EIA is limited because it assumes current laws and regulations will remain generally unchanged through 2040, which is a shortsighted assumption.  For example, even major U.S. oil companies, such as ExxonMobil and ConocoPhillips, are already including a price on carbon emissions in current business planning.  Exxon reported that it anticipates a cost of $60 per metric ton of carbon by 2030.

Additionally, we have seen the rapid development of California’s zero-emission vehicles (ZEVs) mandates in recent years, which is pushing the automotive market toward 1.5 million ZEVs in California by 2025.  With nine other states expected to follow California’s lead, there’s no telling how much these mandates and a potential carbon tax will increase the market for electric vehicles – but there’s no doubt that it will have a significant impact that is largely unaccounted for in the EIA’s Outlook.

Finally, the EIA’s less than bullish outlook for clean transportation technologies is based largely on its assessment of future gasoline prices.  The EIA predicts that the real end-use price of motor gasoline in the United States will decline to $3.03 per gallon (2012 dollars) in 2017, then will rise to just $3.90 per gallon in 2040.  This conservative forecast may be underestimating the increasing difficulty and financial cost of drilling for unconventional oil sources, such as oil sands and extra heavy oil, as conventional oil reserves, which are generally easier and cheaper to produce, continue to diminish.  While the world is certainly not running out of oil, it is running out of oil that can be produced easily and cheaply.

2 Responses to “EIA Foresees Fossil-Fueled Future for Transportation”

  1. The EIA has a notoriously poor record in predicting the future.

    If you accept the rough average of 7% annual improvement in automotive Li-ion cell cost-performance (which is the historic average for 20 years of consumer cells), by 2025 you’re in some very interesting places–let alone 2040.

    Honestly, I don’t know of a whole lot of informed people in the various industries who take this projection terribly seriously.

  2. Ryan Citron says:

    Thanks for your comment John. We agree that the EIA tends to be overly conservative in their estimates. Certainly, understating the potential increase in gasoline prices and underestimating the cost reductions in battery technologies heavily contribute to their assessment.

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